J. P. Morgan Asset Management publishes information about financial investments. Between 2002 and 2011 the expected return for the S&P was with a standard deviation of and the expected return over that same period for a Core Bonds fund was with a standard deviation of (J. P. Morgan Asset Management, Guide to the Markets). The publication also reported that the correlation between the S&P and Core Bonds is . You are considering portfolio investments that are composed of an S&P index fund and a Core Bonds fund. a. Using the information provided, determine the covariance between the S&P and Core Bonds. Round your answer to two decimal places. If required enter negative values as negative numbers.

b. Construct a portfolio that is invested in an S&P index fund and in a Core Bond fund. Let x represent the S&P 500 and y represent the Core Bond fund. Round your answers to one decimal place.

In percentage terms, what is the expected return and standard deviation for such a portfolio? Round your answers to two decimal places.

Expected return

Standard deviation

c. Construct a portfolio that is invested in an S&P index fund and invested in a Core bond fund. Let x represent the S&P 500 and y represent the Core Bond fund. Round your answers to one decimal place.

In percentage terms, what is the expected return and standard deviation for such a portfolio? Round your answers to two decimal places.

Expected return

Standard deviation

d. Construct a portfolio that is invested in an S&P index fund and invested in a Core bond fund. Let x represent the S&P 500 and y represent the Core Bond fund. Round your answers to one decimal place.

In percentage terms, what is the expected return and standard deviation for such a portfolio? Round your answers to two decimal places.

Expected return

Standard deviation

e. Which of the portfolios in parts (b), (c), and (d) above has the largest expected return?

- Select your answer -

Which has the smallest standard deviation?

- Select your answer -

Which of these portfolios is the best investment alternative?

part b
part c
part d
none

f. Discuss the advantages and disadvantages of investing in the three portfolios in parts (b), (c), and (d).

If your goal is to have the largest return and the least risk, which portfolio should you choose?

- options
part b
part c
part d
core bound fund
s&p fund